Rwanda intends to expand its partnership with the Green Digital Finance Alliance (GDFA) in order to become Africa’s sustainable finance hub.
According to Ntoudi Mouyelo, KIFC’s chief investment officer, the Kigali International Finance Centre (KIFC) aspires to be a “reference for sustainable finance and fintech.” Rwanda’s goal is to become “the Luxembourg of Africa for green finance.”
In November, the KIFC agreed to collaborate with the GDFA to create and test a digital tool for assessing the green credentials of small and medium-sized businesses (SMEs). The Global Development Finance Alliance (GDFA), founded by Jack Ma’s Ant Group and the United Nations Environment Programme (UNEP), uses digital technology to improve sustainable development finance.
Metrics for the Environment
According to a survey of African decision-makers conducted by Rwanda Finance, the agency tasked with developing the KIFC, and Africa Legal, Africa urgently requires a new international finance center. Only about one-third of respondents said they had previously worked with such a center, highlighting the difficulties in obtaining capital.
Transparency and compliance are key themes for Rwanda, and money must be shown to have a positive impact, according to Mouyelo. The use of technology has the potential to make this process “seamless.”
According to Nick Barigye, CEO of Rwanda Finance, Rwanda provides “good governance, high levels of connectivity, efficiency, transparency, and an internationally recognized ease of doing business.” In terms of environmental protection, the country was an early African mover and shaker, outlawing plastic bags in 2008. It became the first African country to outlaw single-use plastics in 2019. Rwanda and Luxembourg agreed this year to a three-year project in Kigali to recycle waste to produce energy, fertilizers, construction materials, and electric poles.
A national plan that aims to reduce emissions by 38% by the end of the decade will require $11 billion to be realized. To attract investment, Rwanda has established Fonerwa, Africa’s largest green fund. Fonerwa’s signature projects include promoting climate resilient agriculture and sustainable forest management in Gicumbi, northern Rwanda, as well as the construction of “Green City Kigali,” a model for other cities.
A strong economic recovery, as well as rapid progress on Covid-19 vaccinations, appear to be providing a tailwind. In Kigali, the capital, nearly 90 percent of the adult population is fully vaccinated, and the government aims to raise the national ratio to 60 percent by the end of 2022. Following a 3.4 percent contraction in 2020, an IMF mission to Rwanda in November predicted that growth in 2021 could reach 10.2 percent.
The country intends to issue a green budget statement in 2022, as well as public financial management reforms to track environmental and climate spending. “Policies to attract private sector investment and manage climate change will continue to be critical for more sustainable, inclusive, and resilient growth,” the IMF mission stated.
The country’s green credentials are being bolstered with the construction of a new international airport in Bugesera, southeast of Kigali. According to an Airports Council International report, the airport will save energy used for heating, cooling, and operating the building in accordance with international standards, as well as a reduction in water consumption per passenger
The first phase of the project is expected to be completed by the end of next year, with the second phase, which will double capacity, scheduled for 2032. The airport aspires to be the first in East Africa to be certified as a green building.
The KIFC, which was founded in 2020, has seen early success. Luxembourg and Rwanda signed an agreement in October to support the development of the KIFC. Lux-Development, Luxembourg’s development cooperation agency, will carry out the agreement. The center announced the creation of the $250 million Virunga Africa Fund I in November, which will invest in African economic and social projects. The fund is managed by Admaius and its primary investors include the Qatar Investment Authority and the Rwanda Social Security Board.
Kigali has begun to gain international recognition, appearing for the first time on the Global Financial Centres Index (GFCI). The index, created by the Z/Yen think-tank in London in collaboration with the China Development Institute and published in September, ranks 116 global hubs. Kigali was ranked fifth in Africa, behind Casablanca, Cape Town, Johannesburg, and Mauritius, but ahead of Nairobi and Lagos. The ranking takes into account the business environment, human capital, infrastructure, financial sector development, and reputation.
“At some point, there will be another African Singapore, UAE, or Luxembourg,” says Mark Kenderdine-Davies, chief legal officer at the UK development finance institution CDC. “Mauritius started down this road a few years ago.” Rwanda is now firmly on board as well.”
According to Kenderdine-Davies, a new African financial center like Rwanda has the opportunity to cherry-pick everything that has worked well elsewhere. “Rwanda has the advantage of being able to start over.” It can test market expectations; it can identify international best practices and immediately implement them.”
Other countries will be able to benefit from Rwanda’s capabilities, which will be offered as “green finance as a service,” according to Mouyelo. “In order to become a reference, we must share the tools.” This is a continental initiative.”
In Paris, David Whitehouse works as a freelance journalist. He holds a PhD in Rwandan colonial history and is the author of In Search of Rwanda’s Génocidaires: French Justice and the Lost Decades, which was published in Canada by Seraphim in 2014.